CANADIAN STUDY OF THE ROLE OF THE AUDITOR

• NCJ Number: 65233
• Journal: JOURNAL OF ACCOUNTING, AUDITING AND FINANCE Volume: 3 Issue: 3 Dated: (SPRING 1980) Pages: 251-263
• Author(s): D J JOHNSTON; W M LEMON; F L NEUMANN
• Date Published: 1980
• Length: 13 pages
• Corporate Author: Warren, Gorham and Lamont, Inc
• Publication Format: Article
• Language: English
• Country: United States of America

Annotation

A REPORT BY THE CANADIAN COMMITTEE TO EXAMINE THE ROLE OF THE AUDITOR IS OUTLINED AND COMPARED TO A SIMILAR REPORT PUBLISHED AT THE SAME TIME BY A UNITED STATES GROUP.

Abstract

THE U.S. COMMISSION ON AUDITOR'S RESPONSIBILITIES AND THE CANADIAN GROUP WERE HEADED BY INDIVIDUALS NOT INVOLVED IN PUBLIC PRACTICE AND INCLUDED LAWYERS, BUSINESSMEN, AND ACADEMICS. THE CANADIAN COMMITTEE IDENTIFIED SEVERAL DIFFERENCES BETWEEN THE U.S. AND CANADIAN ENVIRONMENTS, INCLUDING MORE FREQUENT AUDITS OF CANADIAN NONPUBLIC COMPANIES, CANADA'S NOT HAVING A BODY COMPARABLE TO THE U.S. SECURITIES AND EXCHANGE COMMISSION, AND A MORE LITIGIOUS CLIMATE IN THE U.S. BECAUSE OF DIFFERING LEGAL PROCEDURES. BOTH REPORTS BEGIN WITH AN EXAMINATION OF THE ROLE OF THE INDEPENDENT AUDITOR AND AGREE THAT AUDITORS' PROFESSIONAL STANDARDS SHOULD CHANGE TO MEET GROWING PUBLIC EXPECTATIONS. ALTHOUGH THE CANADIAN COMMITTEE WAS MORE INTERESTED IN CURRENT ISSUES THAN DEVELOPING POLICY, BOTH REPORTS CONTAIN RECOMMENDATIONS EXTENDING THE AUDITOR'S ROLE TO DETECT WEAKNESSES IN INTERNAL CONTROLS, AND APPEARANCES BY AUDITORS AT SHAREHOLDERS' ANNUAL MEETINGS. THE CANADIAN COMMITTEE STATED THAT ALL ENTERPRISES WITH PUBLIC ACCOUNTABILITY SHOULD BE REQUIRED TO HAVE AN INDEPENDENT AUDIT. THE AUDITOR'S RESPONSIBILITY TO DETECT FRAUD IS GIVEN EXTENSIVE COVERAGE IN BOTH REPORTS. THE CANADIAN RECOMMENDATIONS CONCERNING AUDITORS WHO PERCEIVE ILLEGAL OR QUESTIONABLE ACTS BY CLIENTS ARE MORE AGGRESSIVE THAN THOSE OF THE U.S. COMMISSION. BOTH GROUPS FELT THAT THE AUDITOR'S STANDARD REPORT SHOULD BE A MORE UNDERSTANDABLE DOCUMENT, BUT ONLY THE U.S. COMMISSION DETAILS SPECIFIC REVISIONS. IN EXAMINING THE INDEPENDENCE ISSUE, THE REPORTS EMPHASIZE DIFFERENT ASPECTS, WITH THE U.S. GIVING MORE ATTENTION TO THE EFFECTS OF MANAGEMENT POLICIES, EXCESSIVE PRICE COMPETITION, AND MANAGEMENT ADVISORY SERVICES. DISCUSSIONS ON REGULATING THE PROFESSION CONCUR ON HAVING THE SETTING OF STANDARDS REMAIN IN THE PRIVATE SECTOR. EACH REPORT GIVES CONSIDERABLE EMPHASIS TO EDUCATION, BUT THE CANADIAN SUGGESTIONS ARE MORE DIRECTED TOWARD PRACTICAL EXPERIENCE. (MJM)